The negotiations to finalise the inter-governmental treaty on greater fiscal discipline face rough water over the next few days, as criticism mounts from the European Parliament and several member states about insufficient rigour in the latest text.

A 100-strong working group, predominantly made up of senior officials from European Union member states, meets for the third time today (12 January).

Much of the criticism focuses on fears that the new text gives member states too much room for manoeuvre when they breach deficit rules.

The latest version of the text, seen by European Voice, allows for countries to enjoy a “temporary deviation” from the objective of a balanced budget “in cases of unusual events outside the control” of member states and that have “a major impact on the financial position of the general government” or “in periods of severe economic downturn”.

Some member states also believe that the latest draft shows too much of a bias towards France’s preferences in diluting the European Commission’s influence.

It envisages excluding the Commission from any major involvement in taking offending member states to the European Court of Justice. French officials are understood to be satisfied with these elements of the draft.

Not only has the role of the Commission been reduced, but the reference in the previous draft to the need for “deeper integration in the internal market” has been deleted, much to the satisfaction of the UK, which has a role as observer in the negotiations. This appears to allay UK concerns that the member states that sign up to the treaty will take decisions that have a wider impact than economic governance.

MEPs’ concerns

Fact File

Draft changes

So far there are three incarnations of the draft inter-governmental treaty. The first was drawn up by Herman Van Rompuy’s legal team immediately after the European Council on 8-9 December, and sent to member states on 16 December. The second draft was presented to the treaty working group on 6 January, based on their discussions on 20 December. Since 6 January, a third draft has been produced, and will form the basis of the next stage of negotiations.

Member states in the excessive deficit procedure must draw up detailed descriptions of structural reforms they will undertake and…1st: “such programmes shall be submitted to the European Commission and the Council”; 2nd adds: “for endorsement”; 3rd adds: “and their monitoring will take place within the context of the existing surveillance procedures of the stability and growth pact”.

Member states which consider that another member state has failed to comply with the new rules… 1st: “may bring the matter before the Court of Justice”; 2nd adds that the Commission may, “on behalf of” the member states bring an action for an alleged infringement before the Court of Justice; 3rd changes 2nd to: member states “may invite the European Commission to issue a report into the matter.” It adds that, in this case, “if the Commission confirms non-compliance in its report, the matter will be brought to the Court of Justice by [member states]”.

Treaty will enter into force…1st: once nine eurozone member states have ratified it; 2nd: once 15 eurozone member states have ratified it; 3rd: on 1 January 2013, provided that 12 eurozone member states have ratified it, or after 12 have ratified it, whichever is the earlier.

To be incorporated into EU treaties1st: no reference; 2nd: “within five years at most following the entry into force”; 3rd: reference deleted.

The Parliament’s negotiating team, which includes Guy Verhofstadt, the leader of the Alliance of Liberals and Democrats for Europe (ALDE) group, Elmar Brok, a centre-right German MEP, Roberto Gualtieri, an Italian centre-left MEP, and Daniel Cohn-Bendit, a French Green MEP, said in a statement yesterday that the latest draft was “not compatible with the existing EU treaties and fails to respect the community method of decision-making”.

The MEPs, who, along with officials from the Commission and the team of Herman Van Rompuy, the president of the European Council, also attend the working group, warned that the new version of the treaty was, in their view, unacceptable. They are determined to make this clear as the next round of discussions gets under way, and to push for a specific mention in future versions of the text of an oversight role for the Parliament and national parliaments. They also say that “stronger provisions must be included to ensure that fiscal stability is accompanied by solidarity and renewed growth”. Verhofstadt described the latest draft as “a step back in many respects” that had crossed Parliament’s red lines.

Summit talks

Van Rompuy said he hoped that the text would be finalised by the time that leaders of member states hold a summit in Brussels on 30 January. But one EU official commented: “The talks are turning rather sour at times. There is still a long way to go.”

The stipulation that countries maintain a balanced budget is a central pillar of the new treaty, but the latest draft makes a concession about how this should be legislated for, accepting that it should be written “preferably” into national constitutions. That could placate countries who fear the drawn-out process of changing constitutions – something that had been highlighted by Denmark, which holds the rotating presidency of the Council of Ministers. Margrethe Vestager, Denmark’s economy minister, said on Tuesday (10 January) that the process of changing the Danish constitution was complex. “We’re aiming to have as binding a commitment as we can in other ways, a general law on the Danish budget for years to come,” she said. “We’re trying to find ways to make the legislation as solid as if it was in the constitution.”

Denmark, like several other non-eurozone member states, has not confirmed that it will definitely take part in the new treaty. Only the UK has formally ruled itself out. Vestager said Denmark was negotiating “with the purpose of being able to join”.

The latest draft also changes the timing of the treaty coming into effect. It would enter into force on 1 January 2013 as soon as 12 member states had ratified it. The previous draft stipulated that 15 countries would have to ratify it before it came into force; the first draft demanded nine.